Asia Stocks Rise After Two-Day Drop as Japan Shares Hold Gains

  • Indian equities slide as trading resumes after holiday Monday
  • Malaysia index rebounds to head for biggest gain since March

JPMorgan's Craig: Shouldn't Move Away From EM so Quickly

Asian stocks rose as Tokyo shares extended a rally to near a seven-month high, while investors continued to position themselves for U.S. President-elect Donald Trump’s fiscal stimulus plans. Indian shares slid.

The MSCI Asia Pacific Index increased 0.2 percent to 134.55 as of 4:01 p.m. in Hong Kong, after two days of losses. The Topix index closed 0.2 percent higher after swinging between gains and losses with Japanese banks outperforming the broader market as Mitsubishi UFJ Financial Group Inc. jumped after earnings beat estimates. The S&P BSE Sensex Index headed toward the lowest close since June as investors grapple with the fallout from the government’s recall of high-value currency notes.

Asian equities were mixed on Tuesday after a selloff driven by speculation that Trump’s promise to bolster U.S. infrastructure spending will fuel growth and spur inflation in the world’s biggest economy, sparking a faster pace of U.S. interest rates hike and a stronger dollar. Odds that the Federal Reserve will raise interest rates by December climbed to 92 percent from 80 percent a week ago. Concern that Trump will implement more protectionist trade policies have also spurred capital flight from emerging markets.

“Risks are elevated, and we are expecting further increases in volatility as markets attempt to second-guess the policies that might eventually come out from the U.S.,” Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. “One of the challenges for markets is that all of these moves are not straightforward in terms of impact. In a lot of cases, we just have to see how things play out.”

The Topix rose for a fourth straight day, and is trading at the highest level since April, outperforming other stock markets in the region on the back of a weaker yen. The Japanese currency rebounded 0.3 percent against the dollar Tuesday following a 1.6 percent slump on Monday.

Malaysia’s FTSE Bursa Malaysia KLCI Index rose 1.1 percent, heading for its biggest gain in eight months. New Zealand’s S&P/NZX 50 Index added 0.5 percent and Singapore’s Straits Times Index advanced 0.6 percent.

Australia’s S&P/ASX 200 Index fell 0.4 percent, as did South Korea’s Kospi index. The Jakarta Composite Index dropped 0.5 percent toward the lowest close in four months, reversing a gain of as much as 1.1 percent. The Philippine Stock Exchange Index lost 0.2 percent after being up as much as 1.1 percent.

Trade Policy

“The spotlight could shine on the contentious trade policy proposals that the president-elect had raised,” Jingyi Pan, a market strategist at IG Asia Pte in Singapore, said in an e-mail. “It is without a doubt that emerging Asian markets would be negatively impacted should a trade war break out between the U.S. and China.”

Hong Kong’s Hang Seng Index rose 0.5 percent from a three-month low, led by banks and energy producers as China Construction Bank Corp. rebounded 1.3 percent and Cnooc Ltd. advanced 0.5 percent. The Hang Seng China Enterprises Index of mainland Chinese companies listed in Hong Kong climbed 0.6 percent, while the Shanghai Composite Index declined 0.1 percent from a 10-month high after a technical indicator signaled gains were overdone.

Futures on the S&P 500 Index rose 0.5 percent. The U.S. equity benchmark index was little changed Monday as investors assessed equity valuations amid a fixed-income rout that has sent Treasury yields surging to the highest since January.

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